10 Reasons To Sell Your Practice Now – Part I

When it comes to selling your financial advisory practice, timing is crucial. But waiting for the perfect time to sell your practice may prove costly. As we experience market volatility not seen in over a decade, you might be thinking about what’s happening to the value of your largest asset: your business. While the continuing bull market is currently still roaring, reversion to the mean is inevitable and by then it might be too late. 

If you haven’t already done so, now is the time to safeguard the value of your practice so you can remain on course for your own retirement. Retire on top and start your succession plan now. It’s an emotional milestone for sure, but one that shouldn’t be put off for too long for a number of reasons. In part 1 in our two-part series, we share our top 5: 

1. Valuations are at an all-time High

Assets continue to grow allowing for valuation multiples that are at an all time high. Investments are performing well—thanks to zero competition from bonds—and driving growth in average assets. But how long will that last?  Since the 1800’s the average secular bull market has lasted roughly 12 years. We are now in our 13th year which means the market could change at any time. Add the uncertainty and volatility resulting from the pandemic and interest rate uncertainty, and advisors who wish to get top dollar for their practice should prepare to sell now.

Take advantage of today’s seller’s market. Given that 40% of advisors are expected to retire in the next 10 years (according to Cerulli Associates), a buyer’s market is just around the corner. Don’t miss the boat.

2. Increasingly Rigorous Regulatory Environment

More than ever our industry has experienced increasing regulatory oversight especially when acting in the capacity of a broker. Reg BI has significantly increased the workload for advisors who are required to document all client communication and recommendations. Regulators have flagged a number of advisors as “deficient,” and fiduciary requirements will undoubtedly keep increasing into the future. 

3. Leave the Management Headaches Behind

Running a modern practice is getting ever more complex. Technology is exploding and clients have come to expect the latest in convenience and communication which is not only costly, but time-consuming to master. Clients also expect a frictionless and personal experience when dealing with any service provider and financial advisory practices are no exception. Security and data protection are further examples of significant investment and management responsibility that will inevitably grow more important in the future. 

4. An Aging Client Base

What is the average age of your clients? Clients over age 70 have depleting assets and their client lifetime value decreases, negatively impacting the value of your practice. We all know that assets under management for an older clientele no longer in the accumulation phase tend to shrink over time as they are withdrawn and as clients pass away. If you are not actively bringing in younger clients – or new business from your existing clients – you’re allowing your practice to stagnate or decline. Buyers are looking for practices that have the potential to develop even after you retire so now is the time to sell. In a best case scenario, find the rare buyer who is willing to share any incremental revenue generated even after you sell your business, effectively increasing your income during retirement. (Spoiler alert: TAG 2.0 offers just such a benefit.)

5. Rising Inflation

As inflation rises, buyers’ expectations of your practice’s future value will decrease. With inflation continuing an upward trend, buyers may become increasingly hesitant or cautious to invest in a stagnant practice.

There are a host of other reasons to begin the process of selling your practice now and we’ll share our next 5 in Part II of this series – stay tuned!

About TAG 2.0

Trust Advisory Group’s small TAG 2.0 division has built-in business continuity and succession planning designed to meet advisors where they are today. Whether it’s simply staying compliant in the face of increased regulatory scrutiny, creating a better work/life balance, or planning for full retirement, TAG 2.0 has a program for you.

TAG 2.0 offers advisors 3 levels of engagement: 

  1. The TAG Practice Protection Program™ is a no-obligation Business Continuity Plan that protects your practice at any stage of your career.
  2. The TAG Semi-Retirement Program™ allows advisors to streamline their practice, continue working with their favorite clients, and participate in any incremental revenue generated. 
  3. The TAG Full Retirement Program™ gives advisors control over their own retirement journey and seamlessly transitions the practice. This option also allows advisors to participate in any incremental revenue generated.

TAG 2.0 is a new take on financial advisory services that combines the best of all worlds: the fresh thinking, creativity and enthusiasm of a start-up division; the friendly, family atmosphere of a small firm, and the security and stability of a 30-year-old institution (TAG Group, Inc.). TAG 2.0 infuses old-world morals and ethics into the next generation of financial advice.

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